European Central Bank: US President Trump tariff move "dangerous"

Are S&P 500 EUR  USD Unconcerned by Trade Wars or Shell-shocked

Are S&P 500 EUR USD Unconcerned by Trade Wars or Shell-shocked

The interest rate on the main refinancing operations, the marginal lending facility and the deposit facility remained unchanged at zero, 0.25% and -0.4% respectively.

Today it said net asset purchases will run until the end of September, or beyond if necessary. The bank dropped the line that it would stand "ready to increase the asset purchase programme (APP) in terms of size and/or duration", if the economic outlook became "less favorable".

Last week the S&P 500 fell 1.3% on fears of a global trade war as Trump announced the U.S. was adopting tariffs of 25% on steel and 10% on aluminium. The economy is now doing better, but the bank has moved cautiously in ending its crisis measures for fear of roiling recently volatile financial markets.

Let's not forget that during a period of more than a year when U.S. policy normalisation is well advanced, the Federal Reserve's interest rate increases have done nothing to support the dollar. Crude oil traded near $60 a barrel and gold slipped as a Bloomberg gauge of commodities slid for a second day. The currency has been rising since it hit a seven-week low of US$1.2154 when Trump unveiled his tariff plan last week. The risks surrounding economic growth were still described as "broadly balanced", although "rising protectionism" was noted as a downside risk. Spanish construction firm ACS rose 8.7pc after reports it was in talks with Italy's Atlantia to break up Abertis in an effort to avoid a bidding war for the highway concessions company.

The euro had earlier climbed, and stocks dropped, after the European Central Bank gave up its pledge to expand or extend quantitative easing if the economic outlook deteriorated.

During the subsequent European Central Bank press conference, Draghi was able to tone down any hawkishness in the statement in his responses to questions from the assembled group of journalists. European Financial Affairs Commissioner Pierre Moscovici said Europe was preparing immediate counter-measures in case of a trade skirmish. [Draghi] also aimed an economist's barb at the US President - reminding Mr Trump that previous trade wars have typically led to a strengthening of the Dollar.

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But it was on the path of policy tightening that Draghi dialled back the most on. The headline consumer price inflation projection was unchanged at 1.4 percent for 2018, while 2019's forecast was revised down a bit to 1.4 percent and kept unchanged at 1.7 percent for 2020.

In recent weeks the President of the European Central Bank (ECB), Mario Draghi has made it clear that the devaluing USA dollar is strengthening the Euro considerably and is a concern, as he doesn't want the Euro to be overvalued which will halt rising inflation levels.

The MSCI Emerging Markets Currency Index fell 0.4 percent, the largest fall in a week.

The bank on Thursday left its key interest rates on hold as well as the size of its bond-buying stimulus program.

The Stoxx Europe 600 index climbed 1.1% to 376.62, the best close since February 28, FactSet data showed. Germany's Xetra Dax added 0.79% to 12,342, while the CAC 40 in France was up 1.29% at 5,254.

Shortly after the announcement of the bank's decision, the Euro appreciated by 0.06% to 1.2419 United States dollars.

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